The global and U.S. economies aren't as feeble as many of the scarier headlines proclaim. By Jeffrey R. Kosnett, Senior Editor From Kiplinger's Personal Finance, October 2014 A reader named Bill just e-mailed me to ask if he should dump some holdings. “I’m worried about all the things going on in the Middle East, Russia and Israel,” he wrote. Beyond his general concern, he specifically asked whether he should retain his positions in Occidental Petroleum (symbol OXY) and Dodge & Cox Income (DODIX).See Also: Kiplinger's Economic Outlooks: GDP Sponsored Content In truth, Bill, if I could choose two ideas that would benefit from global turmoil, I might pick this tandem. Oxy is a huge producer of energy in California, North Dakota and Texas. Its minor Middle East operations are mainly in relatively quiet Qatar and Oman. Oxy is also a primo dividend raiser. Dodge & Cox Income is a superb intermediate-maturity bond fund. It holds mostly Treasuries and investment-grade U.S. corporate bonds that are likely to benefit from America’s safe-haven status and strong demand for high-quality bonds of all sorts. Growing nervousness. Bill’s questions clearly reflect a high level of anxiety that isn’t limited to individual investors. The investing climate is marked by an “uncomfortable and eerie calm,” says Putnam Investments’ Jason Vaillancourt. “Welcome to Voliwood,” writes Bank of America strategist Michael Hartnett, suggesting that more volatility is on the way. The Bank of International Settlements, an organization of world central bankers, writes: “It is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally.” Advertisement A lot of smart people think the recent calm in both the stock and bond markets is about to give way to turbulence. Their current red meat includes the massive amount of outstanding U.S. debt, the budgetary woes of Detroit and Puerto Rico, turmoil in the Middle East and along the Russia-Ukraine border, fears of a collapse in Chinese real estate, an Argentine bond default, and supposedly irresponsible U.S. and European monetary policy that will end badly because...well, just because. I beg to disagree. I see three distinct reasons why all this nervousness is unwarranted. One, the global and U.S. economies aren’t as feeble as many of the scarier headlines proclaim. Two, market calamities are usually precipitated by tangible economic or financial disasters—think of the serial bank failures of 2008 and the quadrupling of oil prices in the 1970s that led to double-digit inflation. No such disaster seems to be in the cards today. Finally, the countries now waging war or in financial peril, including Russia, represent a relatively small part of world economic output. If the state of the world makes you nervous, go ahead and take some profits off the table. If you haven’t rebalanced your portfolio lately, don’t tarry. Because of the stock market’s strong performance over the past 5½ years, you may have more in stocks than you intended. I am growing wary of the junkiest junk bonds (and funds that own them) because the amount of extra yield over Treasury bonds they offer doesn’t seem enough to justify the greater risks of investing in them. That said, the economy is expanding, banks are sound, foreigners are scarfing up Treasury bonds, and yield-oriented energy and real estate investments keep boosting dividends. For moral support, I shared my thinking with USAA’s chief investment officer, Matt Freund. A voice of reason, he beseeches investors to cull real news from noise, to understand that “headlines are designed to be provocative” and that sometimes “disruptions present opportunities.” If you trade on the headlines, Freund adds, “you have to be right twice,” meaning that you have to know both when to sell and what to sell. Investors, says Freund, should not pretend to be political analysts or foreign-policy strategists. I couldn’t agree more.